Revenue from advertising has become an important stream of income for companies that broadcast various forms of media. For companies that offer free service, such as the major media networks that broadcast over-the-air as well as over cable and internet-based companies that offer free services such as searches, revenue generated by sponsored ads typically constitutes a majority of the revenue.
There are several measurements that go into determining how much to charge a sponsor for placing in advertisement during a program or video or on a webpage, but the primary factor is the “effectiveness” of the ad. Basically, if it can be determined, what is the per dollar revenue increase per dollar spend advertising. The higher the revenue generated per dollar invested, the more “effective” the ad was. Some factors that may contribute to the effectiveness of the ad are the number of viewers that are watching the ad, the types of viewers that are watching the ad, and the ability of the ad to connect with those viewers. Thus, an ad will typically be more expensive when shown during a major sporting event rather than at 3 am in the morning.
Typically, the focus of a marketing campaign will be on the current customer base or a target customer base, and focus less on consumers the company feels unlikely to purchase a product or service. A company will try to tailor the advertisement to best meet the goals, i.e. an advertisement that appeals to youth at a time and on a channel that youth will likely be watching. In broadcast media, the types of advertisements typically were geared around the viewers of the particular show the advertisements would be watching. But this approach has several limitations, such as the fact that consumers of various ages may be watching the show as well as shows on other networks or broadcasters.
There are limitations to this approach. For example, an advertisement may be based upon a study of the average viewer of a television show rather than the habits of the actual viewer. Additionally, the advertisement is typically based upon the television show rather than the habits of the viewer. For example, a person may watch football but not be interested in buying alcohol. The success of the advertisement on that viewer is effectively zero. Although marketing firms that typically handle the advertisement campaign account for that in the budget as a loss, it is still a shortcoming in the budget and the current way of advertising.
Some companies are attempting to make up for this shortcoming by coming up with schema to “target advertise,” that is, tailor the advertisement to the individual. Some current ways of advertising include changing the advertisement based upon the viewer's location. Although providing a finer degree of granularity as compared to earlier methods, a large degree of uncertainty remains. Further, although product placement is becoming more prevalent in media, product placement does not meet the need to advertise to the specific viewer and offers little variability with regards to altering the advertisement placement or time to be more appropriate based upon the content of the media the advertisement is shown within are limited.